Case Facts:The department issued two show cause notices raising substantial tax, interest, and penalty demands against the petitioner. The petitioner sought documents relied upon in the notices, but claimed inability to access them as they were uploaded on a different portal. Due to this, no reply was filed and ex parte assessment orders were passed creating liability of about Rs. 159 crore. The High Court declined to entertain the writ petition citing availability of alternative remedy under Section 107 requiring pre-deposit. Court Decision:The Court noted the petitioner’s grievance regarding lack of opportunity and financial difficulty in complying with the statutory pre-deposit. It directed the petitioner to deposit Rs. 3.50 crore within two weeks as a condition for further consideration of the matter. Upon such deposit, notice was directed to be issued to the respondents. The Court further ordered that no coercive steps shall be taken pursuant to the assessment orders subject to deposit.

BackgroundSection 65B of the erstwhile Indian Evidence Act, 1872 governed admissibility of electronic records. The Bharatiya Sakshya Adhiniyam, 2023 (BSA) replaced it with Section 63(4), which introduced an enhanced certification requirement — Part A requiring disclosure of the hash value of the electronic/digital record, and Part B requiring a declaration signed by an expert. The Pune Bar Association filed this writ petition before the Supreme Court challenging Section 63(4) read with the Schedule as unconstitutional, contending it imposes an onerous and impossible obligation on ordinary litigants. The Madras High Court in R. v. B & Anr., 2024 SCC OnLine Mad 6084 had additionally held that the "expert" signing Part B must exclusively be an Examiner of Electronic Evidence notified under Section 79A of the Information Technology Act, 2000, which the petitioner contended made the provision even more unworkable as only a handful of such entities are notified by the government. Crucial FactsThe petitioner contended that the requirement of disclosing the hash value of digital records in Part A and obtaining a declaration from a notified expert under Section 79A of the IT Act in Part B renders Section 63(4) manifestly arbitrary and unjust, making admissibility of electronic records illusory in practice for ordinary litigants. The Court examined the rationale behind the hash value requirement and the expert certification requirement. The Court also examined the interplay between Section 39(1) and Section 39(2) of the BSA — Section 39(1) dealing with opinions of persons with special skill in any field, and Section 39(2) specifically dealing with Examiners of Electronic Evidence under Section 79A of the IT Act. The Court noted that Section 39(2), unlike Sections 63(4) and the erstwhile 65B, is not prefaced by a non-obstante clause, meaning Section 39(1) is not excluded from the domain of electronic records — thereby allowing courts to accept opinions of other suitably qualified persons as expert opinion even if not notified under Section 79A. Court Observations (Verbatim — Crucial)Para 4: "Hash value of an electronic data is synonymous with an electronic fingerprint and provides a sure way of identifying and verifying digital data. The necessity of incorporating the hash value of the electronic record in the certificate is thus to ensure its authenticity and integrity, and cannot be said to lack a rational nexus with the object of the Act. Similarly, certification by an expert in Part B provides an additional layer of authenticity to the secondary electronic evidence. For these reasons, we are of the considered view that the new provision has a clear and rational nexus with the object of the law and cannot be said to be either arbitrary or unreasonable so as to suffer from the vice of manifest arbitrariness."Para 7: "If the two sub-sections are read harmoniously, it is possible to hold, in addition to entities notified as Examiner of Electronic Evidence under Section 79A, if the Court is satisfied, on the basis of unimpeachable material, that any other person has special skill and expertise in computer science and cyber forensics, opinion of such person may be held relevant as an expert with regard to electronic/digital record and such person may sign Part B of the Schedule as an expert.""We are further fortified to make such observation as sub-section (2) of Section 39 (unlike 63(4) and erstwhile 65B) is not prefaced by a non-obstante clause so as to exclude the operation of sub-section (1) from the arena of electronic records.""Under these circumstances, we hold that the finding of the High Court that Part B must be filled up by an expert notified under Section 79A of the IT Act shall not be treated as a binding precedent." inclined to admit the matter and issue notice upon the Union of India, we refrain from giving any conclusive opinion on this issue and keep the question of law open." Final VerdictWrit petition disposed of without admission. Section 63(4) of BSA upheld as constitutionally valid — not manifestly arbitrary. The Madras HC finding that Part B must be signed exclusively by a Section 79A notified expert declared not a binding precedent. Question of law kept open. Petition dismissed at threshold — against the petitioner. 👎Cases Referred by Court#    Case Name    Citation1    R. v. B & Anr.    2024 SCC OnLine Mad 6084 (Madras HC) — finding declared not binding

BackgroundA batch of over 50 writ petitions was filed before the Gujarat High Court challenging the vires of Section 16(2)(c) of the Central Goods and Services Tax Act, 2017. The petitioners were purchasing dealers who had paid GST to their registered suppliers against proper tax invoices, duly reflected in GSTR-2A/2B. However, since their respective suppliers defaulted in depositing the tax so collected with the Government, the Revenue denied Input Tax Credit to these purchasing dealers. The lead matter was taken up as SCA No. 18080 of 2023. The Court confined its examination solely to the constitutional validity of Section 16(2)(c) and expressly did not examine the merits of individual matters. Court Observations (Verbatim)On the GST ITC Scheme and Section 16(2)(c):"The SOR emphatically mentions about 'input tax credit making it available in respect of taxes paid'. Thus, availment of ITC is intrinsically connected with the factum of 'taxes paid'." (Para 43)On distinction from VAT regime and Section 53:"Furthermore, Section 53 of the CGST Act is highly relevant, as it mandates that the tax component utilized by an inter-State supplier must be transferred to the Destination State... If a supplier in the originating state fails to deposit the tax, yet the recipient (or a downstream dealer) is permitted to claim credit based solely on invoices, the originating state would be forced to transfer funds to the destination state that it never actually received. This would result in a direct loss of revenue for the originating state." (Para 59)"Therefore, considering the overall scheme of the Act, any 'reading down' (narrow interpretation) of Section 16(2)(c) would trigger cascading fiscal consequences. The legal position under the former VAT regime was materially different, as input tax credit was confined within the originating state. In contrast, the GST regime is destination-based; therefore, input tax credit must operate seamlessly across state lines for inter-State supplies, requiring strict compliance to maintain fiscal balance." (Para 60)On the statutory mechanism protecting purchasers:"The scheme of ITC under the GST framework does not envisage a situation where the purchasing dealer is left remediless. The Revenue is empowered to initiate recovery proceedings against the supplier under Sections 73 and 74 of the CGST Act for failure to discharge tax liability in respect of the original transaction. Further, in terms of Rule 37A of the CGST Rules, 2017 once the supplier discharges such tax liability, the purchasing dealer becomes entitled to re-avail the credit in the immediately succeeding month. Thus, the statutory mechanism does not permanently deprive the purchasing dealer of ITC; rather, the credit is restored upon payment of tax into the Government treasury. Mere delay or hardship in availing ITC, therefore, cannot constitute a valid ground for reading down Section 16(2)(c) of the CGST Act." (Para 62)On double taxation argument:"The contention regarding double taxation is misconceived. It is well settled that ITC is not a constitutional or vested right, but a statutory concession, subject to the conditions and restrictions prescribed under the Act. Where the statute provides for reversal and re-availment of credit, the same cannot be characterised as double taxation so as to invalidate the provision." (Para 63)On ultra vires challenge:"The mere absence of a specific statutory mechanism enabling recovery by the purchasing dealer from the supplier cannot, by itself, render Section 16(2)(c) of the CGST Act ultra vires." (Para 64)On the doctrine of reading down:"However, in the present case, Section 16(2)(c) of the CGST Act is clear, self-explanatory, and unambiguous. Its plain reading does not give rise to any constitutional or legal infirmity. The underlying intent of the provision is that the Government cannot be deprived of revenue on account of illegal or defaulting conduct on the part of the supplier." (Para 67)On inapplicability of DVAT ratio:"On a close scrutiny of the scheme of the GST regime, it is evident that Section 16(2)(c) of the CGST Act cannot be equated with the VAT regime, particularly with Section 9(2)(g) of the DVAT Act, as examined by the Delhi High Court in On Quest Merchandising India (P) Ltd. (supra). It is also noticed that the Tripura High Court, while following in the case of On Quest Merchandising India (P) Ltd. (supra), has read down Section 16(2)(c) of the CGST Act on the ground of practical impossibility for the purchaser to ensure that the supplier has deposited tax. With respect, we are unable to agree with the said view. The Tripura High Court proceeded on the premise that ITC is intended solely to avoid double taxation under the CGST regime, but did not adequately consider the interplay of Sections 41 and 53 of the CGST Act read with Rule 37A of the CGST Rules, 2017." (Para 68)On Section 155 — burden of proof:"Thus, the purchasing dealer must discharge the initial burden of establishing eligibility to claim input tax credit. Such eligibility is intrinsically linked to the fulfilment of statutory conditions, including the deposit of tax by the supplier with the Government. The expression 'eligible' in Section 155 of the CGST Act cannot be construed as dependent upon a unilateral act of claim by the purchaser; rather, it has a direct nexus with the actual payment of tax by the supplier." (Para 70)On reading clauses conjointly:"Hence, the clauses under sub-section (2), from (a) to (d), are to be read conjointly and not independently of each other." (Para 80)On Lex Non Cogit Ad Impossibilia:"The petitioners have heavily placed reliance on the maxim Lex Non Cogit Ad Impossibilia... However, the scheme of the GST regime does not strictly attract the intent of the maxim... It is true that the purchasers cannot compel the supplier to deposit tax with the government... but simultaneously they can avoid the circumstances by due care and caution. The GST regime operates on the contract/agreement between two parties. While entering into an agreement, a purchaser can ensure there is a clause that takes care of the lacuna and holds the supplier liable to indemnify the purchaser if the said purchasing dealer suffers a loss due to a default by the supplier to remit to the government the tax collected from the purchaser." (Para 76)On the Axel Kittel principle and final observations:"A balanced approach is needed, which finds place in the decision expressed by the European Court of Justice ('ECJ') in the case of Axel Kittel & Recolta Recycling SPRL (supra). Under this principle, the availment of ITC can be denied only if it is shown that the recipient knew or ought to have known that their purchase was connected with a fraudulent evasion of tax." (Para 87)"Albeit, we acknowledge that the provisions of Section 16(2)(c) of the Act are to be viewed from a regulatory standpoint and are anchored in the legitimate objective of maintaining the integrity of the tax chain, preventing systemic revenue loss to the Government; however, it is high time that, in order to resolve the conundrum, the Government undertakes a comprehensive re-evaluation of the dicey situation which purchasers are facing. There is a pressing need for legislative amendments or clarifications to be issued within the GST framework to alleviate the disproportionate financial and administrative burdens currently placed upon purchasers who have an honest claim of ITC. Beyond mere policy changes, the Government should implement a robust, technology-driven tracking mechanism enabling verification of payments made by suppliers against specific invoices in real time, thereby insulating bona fide recipients from the defaults of their vendors." (Para 88) Final VerdictThe Gujarat High Court declined to read down Section 16(2)(c) of the CGST Act or declare it ultra vires the Constitution of India. The writ petitions were rejected on the constitutional question, and the matters were directed to be listed for decision on merits. The Court however strongly urged the Government to address the hardship of genuine purchasers at the earliest through legislative or technological measures.

BackgroundA penalty of Rs. 4,03,26,803/- was imposed on the petitioner vide order dated 15.12.2025 under Sections 122(1)(A), 122(1)(x) and 122(1)(xvi) of the Central Goods and Services Tax Act, 2017, read with the State Goods and Services Tax Act, 2017 and Section 20 of the IGST Act, 2017. Crucially, prior to passing of the said order, no notice whatsoever was issued to the petitioner. Court Observations (Verbatim)"The impugned order is not only violative of the principles of natural justice but is also in conflict with the provisions of Section 75(4) of the Central Goods and Services Tax Act, 2017. Therefore, we have no hesitation in quashing the impugned order qua the petitioner." Final VerdictThe impugned penalty order was quashed. However, liberty was granted to the respondents to proceed afresh against the petitioner in accordance with law.  

BACKGROUNDThe petitioner, M/s. Manoja Kumar Nayak (GSTIN: 21AANPN1032G2Z6), engaged in transportation and works contract, availed Input Tax Credit (ITC) of Rs.4,39,970/- (IGST) during August–December 2017 on the strength of invoices issued by  Auxesia Traders, Kolkata (GSTIN: 19APGPB1744M1ZS). The said supplier was subsequently found to be a non-existent/fictitious entity, based on an Alert Notice No.11/2023-24 dated 19.03.2024 issued by DGGI, Kolkata Zonal Unit, and on the statement of its proprietor Shri Tamoji Bose recorded in 2019. Upon receipt of a letter dated 12.07.2024 from the Superintendent (Anti-Evasion), CGST & Central Excise, Rourkela Commissionerate, requesting reversal of the ITC, the petitioner proactively reversed the entire ITC of Rs.4,39,970/- through GSTR-3B returns filed for April 2023 (Rs.2,64,342/-) and June 2024 (Rs.1,75,128/-), well before issuance of the Show Cause Notice. The petitioner intimated this reversal to the Superintendent vide letter dated 17.07.2024, also pointing out that the Electronic Credit Ledger had a surplus balance exceeding the reversed amount at all material times, and therefore no interest under Section 50 was payable. Despite this, a Summary Show Cause Notice and Demand Show Cause Notice both dated 26.07.2024 were issued under Section 74 of the CGST Act. The petitioner filed a reply dated 30.01.2025 reiterating the voluntary reversal and surplus ECL balance. Ignoring the reply, the Adjudicating Authority passed Order-in-Original dated 03.02.2025 confirming demand of Rs.4,39,970/- (IGST), interest under Section 50, and penalty of Rs.4,39,970/- under Section 74 — solely on the basis of the DGGI Alert Notice, without any independent inquiry. Both petitioners (the second being M/s. Babamani Roadways & Borewells, similarly situated) filed writ petitions before the Orissa High Court challenging these orders. COURT OBSERVATIONS (Verbatim / Near-Verbatim)On mechanical invocation of Section 74 without independent inquiry:"The Adjudicating Authority without independent application of mind merely based on Alert Notice dated 19.03.2024 received from the DGGI, Kolkata Zonal Unit traversed his authority under Section 74 of the GST Act.""Thus, it can be seen from the approach made by the Adjudicating Authority that he blindly followed the Alert Notice of the DGGI, without undertaking any independent inquiry to ascertain credibility of such allegation qua the petitioner... Hence, discrediting such inchoate material being utilised for the purpose of raising demand of tax, interest and penalty under Section 74 this Court thus finds the determination of liability null and invalid in absence of any independent inquiry being carried out to verify the allegation contained in the Alert Notice of the DGGI.""Allegation against supplier vide Alert Notice No.11/2023-24, dated 19.03.2024 would not ipso facto empower the Adjudicating Authority to initiate action against the recipient (petitioner) under Section 74. The language employed in Section 74 suggests that strong and tangible material must be available on record to suggest that the petitioner had the conscious and active involvement in such dubious transactions."On supplier's default not ipso facto establishing recipient's fraud:"It may be highlighted that input tax credit could be availed erroneously or on a mistaken interpretation of law. Therefore, it would not be apposite to form an opinion that in each and every case where the supplier admits or defaults, it would lead to infer that the recipient fraudulently in order to evade tax has availed the input tax credit against fake/bogus invoices.""No inference or presumption or assumption can be deduced that mere availability of balance in the Electronic Credit Ledger would lead to suggest there was utilization."On the period of limitation and abuse of Section 74:"It is emerged from the chronology of events obtained on record that after the period of limitation stipulated in Section 73 is lapsed, the Adjudicating Authority has sought to initiate proceeding under Section 74... pertaining to transactions during August, 2017 to December, 2017, the proceeding under Section 74 is drawn up by issue of Summary of Show Cause Notice and Demand Show Cause Notice, both dated 26.07.2024 conspicuously after 8 years of the alleged transactions."On interest under Section 50:"The Clarification dated 17.07.2023 read juxtaposed with provisions of Rule 88B there is no ambiguity that when the Electronic Credit Ledger has sufficient balance left for adjustment of reversal of input tax credit no interest is chargeable or payable under Section 50."On penalty and double taxation:"Since there is no tax implication in the instant case, as the matter related to wrong availment of input tax credit on account of fake/bogus invoices issued by the supplier and the petitioner has reversed the alleged amount of input tax credit prior to initiation of proceeding under Section 74, the imposition of penalty cannot be a mechanical exercise of power and, thus such order is unsustainable.""Once it is conceded by the Revenue that the amount of input tax credit for a sum of Rs.4,39,970/- has been reversed, raising demand to the same without giving due credit to such reversal is unethical and without authority of law. In such an event, since net tax effect would be 'zero', thereby no penalty would be imposable."On bona fides of the petitioner:"Nonetheless, the petitioner has shown bona fide by reversing the amount of input tax credit the moment a letter from the Superintendent (Anti-Evasion) was issued bringing such conduct of the supplier to his notice." FINAL VERDICTBoth writ petitions allowed. The Order-in-Original dated 03.02.2025 passed under Section 74 — confirming demand of Rs.4,39,970/-, interest under Section 50, and penalty of Rs.4,39,970/- — is quashed. No order as to costs.